The Coalition Government will introduce a new tax incentive aiming to unlock further spending on research and development. The research and development (R&D) tax incentive is the government’s response to extensive consultation with businesses.

As part of the incentive the government has stated that the rate will be higher, the threshold lower and the definition more inclusive so that as many businesses as possible can benefit from this incentive.

The R&D incentive aims to give business’ the opportunity to increase productivity and boost wages. The Coalition agreement will work to increase R&D spending to two per cent of GDP over 10 years. The government will also include refundable tax credits for start-ups and loss-making businesses in the first year of the tax incentive.

The key features of the policy include:

A credit rate of 15%

A $120 million cap on eligible expenditure

A minimum R&D spending threshold of $50,000 per year

A limited form of refund in its first year mirroring Inland Revenue’s tax-loss cash out scheme (to be replaced by a more comprehensive approach in the scheme’s second year)